With Trade Tensions Resolved, December Data are Old News

The freight economy continued to contract in December, capping a year of steady retrenchment in truckload demand according to data released this morning by the Federal Reserve Board. 

The data came in soft, in line with expectations. Some of this can be written off to an unseasonably warm start to winter across much of the eastern United States which weighed on utilities output, but that is only part of the story. The weakness was broad based, including a retrenchment in the automotive sector which had rebounded in November after the GM strike weighed on activity in September and October. 

Still, for the American economy, December now feels like a lifetime ago.

Economic sentiment has brightened over the first few weeks of 2020. With trade tensions seemingly resolved — at least for the time being — the business outlook is improving. Recent progress to resolve trade tensions — both on the U.S.-China and the North American fronts — certainly leaves scope for debate about long-term implications for U.S. exports, but when it comes to near-term business investment, stability and certainty are more important than the fine print. With businesses having more certainty about where to place investments, financial markets have turned bullish and consumer confidence — and critically spending, which began to wobble in November — can be expected to follow. 

For the freight industry, Convoy’s Freight-Weighted Industrial Production Index continued its string of declines — a trend that is likely to continue through January unless the second half of this month posts a very sharp rebound. But despite this, it is clear that the industry’s tides are turning. The unsmoothed series increased for the second consecutive month, and is now above where it stood in February 2019, though still below its level from March and April. Freight demand is stabilizing and, even in mid-January, spring is clearly on the horizon.

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